Intevac
Oct 26, 2009

Intevac Announces Results for the Third Quarter of 2009

SANTA CLARA, Calif.--(BUSINESS WIRE)--Oct. 26, 2009-- Intevac, Inc. (Nasdaq:IVAC) today reported financial results for the quarter and nine months ended September 26, 2009.

The net loss for the quarter was $1.8 million, or $0.08 per diluted share, on 22.0 million weighted-average shares outstanding. The net loss included $1.0 million of equity-based compensation expense, equivalent to $0.03 per diluted share. For the third quarter of 2008, the net loss was $3.4 million, or $0.15 per diluted share, on 21.8 million weighted-average shares outstanding, which included $1.8 million of equity-based compensation expense, equivalent to $0.06 per diluted share.

Revenues for the quarter were $19.2 million, including $12.3 million of Equipment revenues and Intevac Photonics revenues of $6.9 million. Equipment revenues consisted of one 200 Lean® system, as well as upgrades, spares and service. Intevac Photonics revenues consisted of $4.5 million of research and development contracts and $2.3 million of product sales or 33.9% of Photonics revenues. For the third quarter of 2008, revenues were $28.6 million, including $22.9 million of Equipment revenues and $5.7 million of Intevac Photonics revenues, which included $2.4 million of product sales or 42.2% of Photonics revenues.

Equipment gross margin was 48.2%, compared to 39.2% in the second quarter of 2009 and 31.8% in the third quarter of 2008. The sequential improvement in Equipment gross margin reflected higher-margin upgrades and improved factory utilization, while the year-over-year increase reflected changes in product mix to higher-margin technology upgrades. Intevac Photonics gross margin was 40.1%, compared to 34.1% in the second quarter of 2009 and 31.9% in the third quarter of 2008. The increase in Photonics gross margin was primarily a result of higher-margin development contracts and lower product manufacturing costs. Consolidated gross margin was 45.3%, compared to 31.8% in the third quarter of 2008.

Operating expenses for the quarter totaled $12.4 million, a decline of 22.4% compared to $16.0 million in the third quarter of 2008 and a decline of 3.0% compared to $12.8 million in the second quarter of 2009. Operating expenses declined compared to the second quarter of 2009 and to the third quarter of 2008 reflecting the cost savings from our global cost reduction plan.

The net loss for the first nine months of 2009 was $12.1 million, or $0.55 per diluted share, on 21.9 million weighted-average shares outstanding. The net loss included $3.7 million of equity-based compensation expense, equivalent to $0.12 per diluted share. For the first nine months of 2008 the net loss was $2.7 million, or $0.13 per diluted share, on 21.7 million weighted-average shares outstanding. The net loss included $5.0 million of equity-based compensation expense, equivalent to $0.16 per diluted share.

Revenues for the first nine months of 2009 were $43.8 million, including $24.5 million of Equipment revenues and $19.3 million of Intevac Photonics revenues. Equipment revenues consisted of one 200 Lean® system as well as disk lubrication systems, equipment upgrades, spares and service. Intevac Photonics revenues consisted of $11.5 million of research and development contracts and $7.8 million of product sales or 40.4% of Photonics revenues. In the first nine months of 2008, revenues were $93.9 million, including $75.6 million of Equipment revenues and $18.3 million of Intevac Photonics revenues, which included $6.8 million of product sales or 37.4% of Photonics revenues.

Equipment and Intevac Photonics gross margins for the first nine months of 2009 were 41.4% and 37.9%, respectively, compared to 40.9% and 36.4% in the first nine months of 2008. The improvement in Equipment gross margin reflected changes in product mix partially offset by lower revenues and factory absorption. The increase in Intevac Photonics margin reflected higher-margin development contracts and an increased percentage of revenue derived from higher-margin product shipments. Consolidated gross margin in the first nine months of 2009 was 39.9%, compared to 40.0% in the first nine months of 2008.

Operating expenses for the first nine months of 2009 totaled $38.9 million, and declined 19.4% from $48.2 million in the first nine months of 2008. Operating expenses declined primarily as the result of decreased spending on development of new Equipment products as well as the result of cost savings from our global cost reduction plan.

Order backlog totaled $52.2 million on September 26, 2009, compared to $44.0 million on June 27, 2009 and $18.5 million on September 27, 2008. Backlog as of September 26, 2009 includes five 200 Lean®

systems, compared to five on June 27, 2009 and one on September 27, 2008.

“We are encouraged by the continued recovery in the hard drive market, which has surpassed all expectations going into 2009,” commented Kevin Fairbairn , president and chief executive officer of Intevac. “There are indications of tightness in the current supply of media, particularly for the mobile market. In the third quarter, heightened levels of capacity utilization led to the first capacity tool orders for Intevac

since 2008. Positive momentum continues in our Photonics business, where we achieved ten percent growth in revenue from the prior quarter and record levels of orders and backlog.”

Conference Call Information

The company will discuss its financial results and outlook in a conference call today at 1:30 p.m. PDT (4:30 p.m. EDT). To participate in the teleconference, please call toll-free (877) 718-5111 prior to the start time. For international callers, the dial-in number is (719) 325-4831. You may also listen live via the Internet at the company's website, www.intevac.com, under the Investors link, or at www.earnings.com. For those unable to attend, these web sites will host an archive of the call. Additionally, a telephone replay of the call will be available for 48 hours beginning today at 7:30 p.m. EDT. You may access the replay by calling (888) 203-1112 or, for international callers, (719) 457-0820, and providing conference ID 5562342.

About Intevac

Intevac was founded in 1991 and has two businesses: Equipment and Intevac Photonics.

Equipment Business: We are a leader in the design, manufacture and marketing of high-productivity lean manufacturing systems and have been producing Lean Thinking platforms since 1994. We are the leading supplier of magnetic media processing systems to the hard drive industry and offer highly efficient technology solutions to the photovoltaic industry and advanced etch systems to the semiconductor industry.

Intevac Photonics: We are a leader in the development and manufacture of leading edge, high-sensitivity imaging products and vision systems, as well as table-top and handheld Raman instruments. Markets addressed include military, industrial, physical science and life science.

For more information call 408-986-9888, or visit the company's website at www.intevac.com.

200 Lean® is a registered trademark of Intevac, Inc.

Safe Harbor Statement

This press release includes statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Intevac claims the protection of the safe-harbor for forward-looking statements contained in the Reform Act. These forward-looking statements are often characterized by the terms “may,” “believes,“ “projects,” “expects,” or “anticipates,” and do not reflect historical facts. Specific forward-looking statements contained in this press release include, but are not limited to; tightness in media supply and expected momentum of the Photonics business. The forward-looking statements contained herein involve risks and uncertainties that could cause actual results to differ materially from the company’s expectations. These risks include, but are not limited to: oversupply in the media industry and failure to achieve historical growth rates for the Photonics business, each of which could have a material impact on our business, our financial results, and the company's stock price. These risks and other factors are detailed in the company’s regular filings with the U.S. Securities and Exchange Commission.

INTEVAC, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)
  Three months ended   Nine months ended


September 26,
2009



 

September 27,
2008

September 26,
2009

 

September 27,
2008

Net revenues    
Equipment $ 12,293 $ 22,855 $ 24,477 $ 75,558
Intevac Photonics   6,862

 
   

5,705
   

19,304    

  18,309  

Total net revenues

19,155

28,560

43,781

93,867


 
Gross profit 8,678 9,085 17,456 37,529
Gross margin

Equipment 48.2 % 31.8 % 41.4 % 40.9 %
Intevac Photonics   40.1 %

 
  31.9

%
  37.9 %     36.4 %
Consolidated 45.3 % 31.8 % 39.9 % 40.0 %


 
Operating expenses



Research and development
6,840

8,620

22,255

26,426

Selling, general and administrative

 
5,551  

 
  7,341

 
  16,654       21,818  


Total operating expenses
12,391

15,961

38,909

48,244



 
Operating loss

Equipment (1,836 ) (4,357 ) (14,306 ) (4,494 )
Intevac Photonics (628 ) (1,824 ) (3,248 ) (3,715 )
Corporate  

(1,249
)    

(695 )

 
(3,899 )  

  (2,506 )
Total operating loss (3,713 ) (6,876 ) (21,453 ) (10,715 )


 
Interest and other income   122       884     780

 
   

3,101
 
Loss before income tax benefit (3,591 ) (5,992 ) (20,673 ) (7,614 )
Income tax benefit  

1,799    

  2,639  

  8,621       4,887  


Net loss
$ (1,792 )   $

(3,353
) $ (12,052 )  

$
(2,727 )


 

Net loss per share

Basic $ (0.08 ) $ (0.15 ) $ (0.55 ) $ (0.13 )
Diluted $ (0.08 ) $ (0.15 ) $ (0.55 ) $ (0.13 )
Weighted average common shares outstanding

Basic 22,014 21,761 21,942 21,700
Diluted 22,014 21,761 21,942 21,700




 

INTEVAC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

September 26,
2009

 

December 31,
2008



(Unaudited)   (see Note)
ASSETS


 

Current assets

Cash, cash equivalents and short-term investments $ 31,766 $ 39,201
Accounts receivable, net 12,313 15,014
Inventories 22,792 17,674
Deferred tax assets 3,356 3,204
Prepaid expenses and other current assets   5,498

 
   

4,806
 
Total current assets 75,725 79,899


 
Long-term investments 65,973 66,328
Property, plant and equipment, net 13,290 14,886
Deferred tax assets 18,880 14,765
Goodwill 7,905 7,905
Other intangible assets, net 3,660 4,054
Other long-term assets  

1,257    

  1,332  

Total assets

$
186,690    

$ 189,169  


 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities

Note payable $ $ 2,000
Accounts payable 5,203 4,214
Accrued payroll and related liabilities 3,176 3,395
Other accrued liabilities 4,191 3,175
Customer advances  

5,745
   

 
2,807  
Total current liabilities

18,315


15,591


 
Other long-term liabilities

203


509
Stockholders’ equity

Common stock ($0.001 par value) 22 22
Additional paid in capital 133,382 128,686
Accumulated other comprehensive loss (2,349 ) (4,808 )
Retained earnings   37,117       49,169  
Total stockholders’ equity

  168,172  

    173,069  
Total liabilities and stockholders’ equity

$ 186,690     $ 189,169

 


 



Note: Amounts as of December 31, 2008 are derived from the December 31, 2008 audited consolidated financial statements.



 

INTEVAC, INC.

SUPPLEMENTAL INFORMATION REGARDING EQUITY-BASED COMPENSATION EXPENSE



(In thousands, except per share amounts)

(Unaudited)



 

The effect of recording equity-based compensation expense for the three- and nine-month periods ended September 26, 2009, and September 27, 2008 were as follows:

   
Three months ended Nine months ended

September 26,
2009



 

September 27,
2008

 

September 26,
2009



 

September 27,
2008

Equity-based compensation by type of award:

Stock options

$
834

$
1,311

$
3,051

$
3,960


Employee Stock Purchase Plan
174

478

624

978

Amounts (capitalized as inventory) released to cost of sales

 
(9 )   (23 )

  34  

  66  
Total equity-based compensation 999 1,766 3,709 5,004
Tax effect on equity-based compensation   (291 )   (512 )   (1,077 )   (1,499 )
Net effect on net income $ 708   $ 1,254   $ 2,632   $ 3,505  
 
Effect on earnings per share:
Basic $ 0.03 $ 0.06 $ 0.12 $ 0.16
Diluted $ 0.03 $ 0.06 $ 0.12 $ 0.16

Source: Intevac, Inc.

Intevac, Inc.
Jeff Andreson, 408-986-9888
Chief Financial Officer
Claire McAdams, 530-265-9899
Investor Relations